The Art & Science of Active Trend Trading–March 30, 2014

Good Day Traders,
Did the Bears put the final stake in the Bulls heart and will the downside continue? We shall see! But while we wait for a conclusion, April will be a great month for training for both the Bay Area Money Makers (BAMM) and Active Trend Traders. The BAMM will host Lee Tanner at our monthly meeting on April 5th with a live feed webinar for those out of the area BAMM members. Lee is a phenomenal trader who practices mainline IBD® strategies. His presentations are always amazing. You can RSVP at Bay Area Money Makers.

During April the Active Trend Traders Mid-Week Market Sanity Check Webinars will provide training on Candlestick Reversal Patterns. So for those who are interested in learning more about how to properly interpret Candlestick Patterns follow up at registration will be up soon. Lastly, check out my YouTube channel at Market Tech Talk for updates on the market and observations of stocks setting up for potential trades.

Please keep those great personal stories flowing, it is awesome to share in each other’s successes!

General Market Observation:  Good week for Bears with the Market continuing on its downward path and remaining In Correction. There were several excellent downside opportunities available either in the index ETF’s or individual stocks this week as stocks fell with the market indexes. As we enter the last weekend in March, the Indexes are at a critical juncture, especially the Nasdaq and Russell—clearly the weakest of two indexes this past week. The two indexes most weighted towards either growth stock or small-cap stocks which have helped fuel the Bull Market for over 5 years appear to be stumbling and both are down around 5% from the recent highs. Interestingly, the S&P and the DOW have held up better and are down less than 2% from their highs. Part of this is due to profit taking in the growth stocks and rotation into what seems to be more stable entities available on the more elder indexes. The significance of the divergent in performance between the Indexes will show as price action plays out over the next several weeks and months.

Entering this week both the Nasdaq and Russell are at a critical juncture. While the market is in correction the long-term trend remains up—but, since the correction and follow through in 2012 that propelled the markets into its current trajectory, all pullback corrections have been short and shallow. As we watch the current action, we will be watching to see if this pattern continues. We would expect it to continue because that’s what patterns do, however if the pattern fails that would be an early clue of something more sinister might happen. If the pattern fails here perhaps we’ll move into a more severe correction. The chart below shows the Nasdaq has bounced every time price action has approached the 100 day moving average for over a year. One would expect for the pattern to continue so a bounce may be in order this week. What we’ll be paying close attention to is the vitality of this potential bounce!

Nasdaq 3-28
Outs & Ins:  No new adds to the Running List this weekend. Several of you have asked where the running list comes from and how are stocks added. The Running List begins new every year with the IBD® 50 as its initial foundation and captures every stock added to this elite list of great growth stocks two times per week. The Running List is now up to 108 stocks. Knowing what to trade is the first rule of Active Trend Trading. Having a list made up of exceptional growth stocks that have passed stringent fundamental screening assures we trade from a list of strong candidates. This in turn meets two of our objectives, Clarify & Simplify the process. Finding great growth stocks and then tracking great stocks is key.

This past week many leading stocks were selling off with the market. As you do your weekend reviews look for the stocks that are still holding above their 50 day moving averages these may be the best bet if we see a relief rally this week. Focus on the stocks currently living below the 50 day moving average if your are looking for downside trades. If they bounce, put in Bear Flags and if the market’s rebound is weak these laggards may lead the way to new lows! Of the 108 stocks on the running list 67.6% were currently living below the 50 day moving average! This is not a sign of strength. I’ll pull my short candidates from this list.

Comments and opinions written below this line of text may be provocative and only obliquely related to trading. Some may find these “Off the Wall” comments challenging to their outlook on life. I will not post any comments made on subject matter below this line to the group, so if you disagree blast away.


Main Wall


Off the Wall:  When I start to write Off the Wall for each edition I never know what’s going to come out and that’s OK because this section is supposed to be unpredictable, challenging and well—Off the Wall! Some news article or some other observation during the week gets my attention and I use this short segment to either vent or rant or just report the observation. Like this past week, a friend of mine on Facebook posted an article about some women who has been labeled the puppet master behind the current President. I didn’t take that much time to read the article other than to note that it was some women named Valerie something or other, and that she may be the master of the marionette in this case. Now this brief note isn’t intended to debate this women’s role and relationship with the President because who knows maybe she’s his spiritual advisor or something.

What I found most interesting about my friends post is the reaction of her friends to the posted article. Additional the way my friend posted the article without truly taking a stand and providing her own thoughts about the article was a bit comical and sly. The responses to the article came fast and furious and it seemed that there was very little thought required to provide an immediate response because each of the respondents were already wired with their belief that this women was either an evil, sinister, puppet master or the most wonderful, brilliant strategist who ever came to Washington via Chicago. In reading the posted comments there was no middle ground on what people thought about this woman! None!

As I pondered how people responded I also found it interesting that none of those who responded asked the people with an opposing view, why or how did they come to their conclusion regarding Valerie. Each little snippet of response was simply a monologue of what the person believed and when the opposing side weighed in with their little snippet the battle lines were established and true critical thought and debate was an unachievable objective! This in turn got me wondering how tied we are to our opinions about other things in life and of course our opinions about trading. Are we so locked in to the belief in our opinions that self-directed critical though is impossible? Because of this do we stay chained in our cell sentenced to always making the same mistakes in our trading and never experiencing the freedom we so desire from our trading? Could it be that your freedom as a trader is simply one changed opinion away and by changing that opinion we could take off on a new successful trajectory? Hmmm?…. I’ll leave off today with that question to ponder and we will revisit it again in the very near future!


Share Your Trades:  Many of you have sent me notes regarding the success you are having with the Active Trend Trading System.  Please send you stories to me at so I can share them with our fellow traders.  Plus, if you are considering a trade that appears to be at a proper Action Point, sent that alert also!  Thanks!